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P-Value Method

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Insurance companies partially base automobile insurance rates on the mileage per year of the insured car. The average passenger vehicle in the United States is driven 11.3 thousand miles per year. In a Florida town, the average of 42 residents is found to be 9.8 thousand miles per year with a standard deviation of 5.8 thousand miles. It is claimed that the driving habits of these residents are different from the rest of the country. Is this claim supported at the 2% level of significance? Assume a normal population. Use the P-value method.

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Solution Summary

Insurance companies partially base automobile insurance rates on the mileage per year of the insured car. The average passenger vehicle in the United States is driven 11.3 thousand miles per year. In a Florida town, the average of 42 residents is found to be 9.8 thousand miles per year with a standard deviation of 5.8 thousand miles. It is claimed that the driving habits of these residents are different from the rest of the country. Is this claim supported at the 2% level of significance? Assume a normal population. Use the P-value method.

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Sample mean is X=9.8
<br>Standard deviation is: SD = 5.8
<br>N=42
<br>Degree of Freedom = DF = 42-1=41
<br>Test at 2% level of significance :
<br>Ho: M = 11.3
<br>Ha: M &#8800; ...

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